Obama administration unlikely to push liberalized trade deals

A more liberalized international trade policy likely will not be an Obama administration priority in his first year in office.

But protectionism is not expected either.

Other issues will take precedence early in Obama’s tenure, said Bruce Stokes, National Journal International Economics columnist; Fellow, German Marshall Fund, and Fellow, Pew Research Center, speaking recently at the Sourcing USA Summit in Austin.

“We are a long way from protectionism,” Stokes told the audience of mostly international cotton buyers and sellers. “But we have to guard against it.”

He said during the recent presidential campaign Republicans accused Democrats of protectionist policies. He also said President Elect Obama was “more critical of trade than any candidate in generations. But I’m not certain his criticisms are anti-trade.”

Stokes said Obama at one time said he wanted to renegotiate NAFTA and opposed the Columbia and Korea Free Trade agreements. He also supports pressuring China to strengthen their currency and stronger enforcement of U.S. trade laws. He suggested ending tax advantages for companies operating overseas.

Stokes said candidate Obama pledged to “end tax advantages that helped move jobs out of the United States. It will be interesting to see how the new tax bill next year will treat profits of multi-national corporations.”

U.S. consumers are not high on more liberalized trade, either, Stokes said. In fact, most view trade as a negative for the U.S. economy. Stokes said U.S. consumer support for trade has fallen 25 percent since 2002. Support for free trade agreements also dropped from 47 percent in 1997 to 35 percent in 2008.

“A plurality now opposes FTAs,” Stokes said. “The majority of Americans believe trade equals job losses. They believe trade has an adverse impact on wages and believe they have seen a stagnation of wages because of globalization. There is probably some connection,” he said.

He said voters don’t see trade as a positive impact on prices. “They think trade raises prices, but they shop at Wal-Mart.”

Only 3 percent to 4 percent of Americans view trade as a primary concern. “That’s about the same number that believes in space aliens,” Stokes said.

Stokes also said world opinion believes the United States is a protectionist trade partner. “The reality is more complex. Markets are more open than ever.”

Stokes said the American public should take campaign rhetoric “with a grain of salt.” He said candidates devoted little time or advertising money on trade issues. “We heard little about the China trade imbalance. But American/Chinese trade is very complex.”

Stokes said renegotiating NFTA would be complex as well. “It’s not clear that the United States would make concessions that would be demanded by Canada and Mexico.”

He said some trading partners have had little difficulty with labor and environmental regulations in trade agreements. Others would, he said. “Most nations would not want to debate labor statements with the United States.”

He said trade will not vie for a top spot on Obama’s early agenda. “He has other topics—the economy, wars, etc.”

He said trade policy debates also could divide Democrats in Congress. “The Obama administration will tread lightly with trade liberalization.”

Stokes said Obama likely will move slowly on Columbia and Korea bilateral trade deals but would need to “look closely at the future of agreements,” as well as the rapidly increasing trade imbalance with China, currently at $250 billion.

He said the worsening economic crisis affects trade as it leads the United States to subsidize more industries. Becoming more engaged in industries affects trade issues.

Stokes said the Doha round of trade talks “are stuck. I don’t think it will be revived until 2010 or 2011. It will be difficult (to revive Doha) during a recession.”

Farm subsidies remain a sticking point. “It will be difficult to get farmer support if commodity prices remain low.”

The Brazil cotton case continues to cause trade concerns as well. “Some $4 billion in retaliation is possible and that puts pressure on other segments of the U.S. economy.”

Stokes said appointment of a new U.S. trade negotiator would likely have little impact on trade policy. He said the position typically goes as a “favor. It will be interesting to see if trade policy runs out of the trade representative’s office or the White House, as it usually is.”

Stokes said a new secretary of agriculture will come in during a relatively quiet time. “Congress recently passed a farm bill and there is nothing that needs to be done with farm policy immediately. But the USDA is deeply involved in trade policy. USDA spends a lot on agricultural export issues and will not cede that power. USDA will remain a major trade player.”

Stokes said hanging onto commodity programs passed in the farm bill could be a priority for U.S. farmers. “The Secretary of Agriculture will be an important voice in that discussion.”

He said a lame duck session likely will not pass a Columbia Trade Agreement. “It’s almost impossible.”

Stokes said Obama’s administration will not mirror Hoover’s. “But we may see some more trade restrictions.” He predicted little impact on cotton policy.

Stokes said improving the U.S. trade comparative advantage will require “a better education system than we have and continuous upgrading of skill levels.” Other developed countries, he said, offer better education programs. “They keep wages higher in globalization because they have better education.”

Those education opportunities, he said, allow workers to “migrate to higher value-added jobs.”

He said even third world textile plants are “competing on a global level with high tech.”